Correlation Between Aqua Metals and Iterum Therapeutics

Can any of the company-specific risk be diversified away by investing in both Aqua Metals and Iterum Therapeutics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aqua Metals and Iterum Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aqua Metals and Iterum Therapeutics PLC, you can compare the effects of market volatilities on Aqua Metals and Iterum Therapeutics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aqua Metals with a short position of Iterum Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqua Metals and Iterum Therapeutics.

Diversification Opportunities for Aqua Metals and Iterum Therapeutics

-0.53

Correlation Coefficient

Aqua Metals  Iterum Therapeutics

Excellent diversification

The 3 months correlation between Aqua and Iterum is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Aqua Metals and Iterum Therapeutics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iterum Therapeutics PLC and Aqua Metals is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aqua Metals are associated (or correlated) with Iterum Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iterum Therapeutics PLC has no effect on the direction of Aqua Metals i.e., Aqua Metals and Iterum Therapeutics go up and down completely randomly.

Pair Corralation between Aqua Metals and Iterum Therapeutics

Given the investment horizon of 90 days Aqua Metals is expected to under-perform the Iterum Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Aqua Metals is 1.29 times less risky than Iterum Therapeutics. The stock trades about -0.11 of its potential returns per unit of risk. The Iterum Therapeutics PLC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Iterum Therapeutics PLC on September 14, 2024 and sell it today you would earn a total of  92.00  from holding Iterum Therapeutics PLC or generate 86.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aqua Metals  vs.  Iterum Therapeutics PLC

Aqua Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Iterum Therapeutics PLC

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iterum Therapeutics PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Iterum Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aqua Metals and Iterum Therapeutics

The main advantage of trading using opposite Aqua Metals and Iterum Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqua Metals position performs unexpectedly, Iterum Therapeutics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Iterum Therapeutics will offset losses from the drop in Iterum Therapeutics' long position.

The idea behind Aqua Metals and Iterum Therapeutics PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.